By Brian Bloxom, ChFEBCSM
Some of the biggest lessons we teach our children are responsibility, honesty, and respect. However, what most parents don’t realize is that the earlier you add money to the list, the better off they’ll be later in life. Whether your kids earn a weekly allowance or plan to leave for college in the fall, it’s important to be honest, guide them on their journey, and, most importantly, ensure they have the right tools to lead a healthy financial life as an adult.
We can’t always predict what the future holds for our kids. But if we get them on the right track early, they’ll have the knowledge to make confident financial decisions at every stage of their life.
1. Plan Early for College
College tuition is typically the biggest expense you’ll face while raising your children. And if they’re forced to take out loans, it can be the most significant expense your kids will face. Ideally, start saving for your child’s college education as early as possible, even if that means putting away $100 a month into a separate savings account.
Once your child is in high school, it’s time to discuss their plans after high school seriously. Will they attend community college first? Are their top schools public or private institutions? Will their desired career require graduate, medical, or law school?
Undergraduate tuition at private colleges averages $37,650, compared to $10,560 for state residents attending public colleges. (1) And for a graduate program, it can cost $30,000 to $40,000 per year. (2)
When your child reaches their junior or senior year of high school, encourage them to research grants and scholarships to reduce the tuition burden. If a loan is needed, investigate interest rates and compare the benefits of private versus public school loans.
By keeping your kids involved in the college planning process, they’ll learn the value of planning ahead for financial goals and how to save for major expenses.
2. Set Them Up With a Bank Account
Once your kids are earning money—whether through an allowance you provide or a job—consider setting up an interest-bearing bank account for them. This helps teach them about banking, saving, record-keeping, and the power of compound interest.
One option is to open a savings account in your and your child’s name. While setting up the account at the bank, share with them how interest works and how their money can grow the more they save. It may be helpful to run through a few scenarios, such as how much you would have saved in one year if you contributed $25 versus $10 per month into the account.
3. Start a Family Budget
Knowing where your money is going is essential to achieve financial success. Anyone at any age can benefit from a budget. Help your kids improve their money management skills by starting a family budget. You can use an online program, such as Mint, or the ever-reliable spreadsheet.
Teach your kids to track their purchases and how much they’re saving each month. You can create family goals, such as a vacation, that everyone contributes to so your kids learn the value of working toward long-term goals (and the satisfaction that comes with reaching those goals).
4. Get Involved With Charity
Money doesn’t just buy things. It can also be used to help other people. As a family, research a charitable organization or cause to which you want to donate. Each family member can contribute a percentage or dollar amount to the charity either monthly or annually.
This seemingly small move can help your kids understand the different ways money can be used, as well as how fulfilling it can be to give rather than receive.
5. Recruit Professional Help
As a parent, one of the most important things you can teach your child is to ask for help when they need it. When it comes to talking about money, there’s nothing shameful about admitting what you don’t know. That’s what we’re here for: to bridge the gap between what you do understand and what you don’t understand.
This is why it can be helpful to introduce your kids to your financial advisor or, if you aren’t working with one, to find one who is willing to work with your entire family. An advisor can help your kids start investing and learn the importance of saving for retirement as early as possible.
The more financial knowledge your kids have, the better equipped they’ll be to get on the right financial foot once they graduate college and enter the adult world. Our team at Sentinel Wealth Partners would be happy to meet with you and your children to talk about money management and identify opportunities to start savings and investing early. Reach out to us today by calling our office at 703-832-0164, sending an email to firstname.lastname@example.org, or using our online calendar.
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits Consultant (ChFEBCSM), and Chartered Retirement Planning Counselor (CRPC) with 25 years of experience in financial advising. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety. When he’s not working, you can find Brian spending time with his wife, Jessica, and their two sons, Spencer and Preston. He enjoys coaching soccer, serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.